Sec. 7-571. Establishment of special capital reserve fund to secure general obligations.
Sec. 7-571. Establishment of special capital reserve fund to secure general obligations. (a) Any certified municipality may establish a special capital reserve fund to
secure general obligations with a term of more than one year issued pursuant to subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive. The special capital
reserve fund shall be established pursuant to an indenture or other agreement between
the municipality and the trustee. Such indenture or agreement shall include all the terms,
conditions and requirements pertaining to the special capital reserve fund in accordance
with the requirements of subsection (a) of section 7-394b and sections 7-560 to 7-579,
inclusive, any requirements imposed by the secretary or the Treasurer, and any requirements imposed by the ordinance or resolution authorizing the issuance of such general
obligations, and the municipality shall agree to comply with all such terms, conditions
and requirements for the benefit of the holders of any general obligations supported by
such special capital reserve fund and for the benefit of the state. Such indenture or
agreement may also include covenants to pay the fees and expenses of the trustee and
to indemnify the trustee against claims against the trustee and any other provisions which
the municipality determines are necessary or appropriate to secure general obligations.
The municipal officer or body empowered to issue such general obligations or to determine the details of such general obligations authorized by the municipality may establish
such capital reserve fund and may determine the details and approve the terms of all
indentures and agreements and other instruments necessary or appropriate to establish
and implement such special capital reserve fund as provided in subsection (a) of section
7-394b and sections 7-560 to 7-579, inclusive, and may bind the municipality pursuant
to any such indenture or agreement.
(b) The special capital reserve fund shall consist of (1) bond proceeds and other
moneys of the municipality available to be deposited therein and (2) any money made
available therefor by the state in accordance with this section. All moneys held in the
special capital reserve fund, except as hereinafter provided, shall be used to pay interest
due and owing in respect of general obligations of the municipality secured by such
special capital reserve fund and for the redemption and retirement of such general obligations as they mature or become due pursuant to any sinking fund redemption provisions,
or for the redemption and retirement of such general obligations pursuant to any refinancing or refunding provided any such refinancing or refunding obligations are not supported by any special capital reserve fund and any amounts in such special capital reserve
fund are first applied to repay to the state any amounts which the state has paid or
deposited in the special capital reserve fund and which the municipality has not repaid
to the state. Income and interest from the investment of moneys in the special capital
reserve fund shall be retained therein to meet any deficiencies in the maximum required
capital reserve. Any amounts in excess of the maximum required capital reserve may
be transferred first to the state in an amount equal to the aggregate amount transferred
by the state for deposit in the special capital payment fund minus the aggregate amount
of all previous reimbursements to the state, second to the debt service payment fund until
the moneys in the debt service reserve fund equal or exceed the debt service payment
requirement, and third to the municipality. Notwithstanding any provisions of this section, no municipality shall issue an obligation secured by a special capital reserve fund
unless and until there is in the special capital reserve fund moneys and investments in
an aggregate amount equal to the maximum required capital reserve, after giving effect
to such obligations being issued. Any municipality may appropriate and deposit bond
proceeds into the special capital reserve fund to bring the amount of money and investments therein to the maximum required capital reserve. Any requirement set forth in
subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, pertaining to
the special capital reserve fund may be modified to the extent necessary to comply with
any covenant of the municipality necessary to ensure the exclusion of interest on general
obligations of the municipality supported by the special capital reserve fund from gross
income for federal income tax purposes. On or before December first of each year, there
is deemed to be appropriated from the state General Fund such sums, if any, as shall be
certified by the chief executive officer of a certified municipality to the secretary, the
Treasurer and the Municipal Finance Advisory Commission as necessary to restore
special capital reserve fund to an amount equal to the minimum required capital reserve,
and such amounts shall be allotted and paid from the General Fund of the state to the
trustee for deposit in the special capital reserve fund. Such amounts, if any, shall be
repaid by the municipality to the state and credited to the General Fund as soon as
possible, from any moneys available therefor. For purposes of valuation of the special
capital reserve fund, securities acquired as an investment for such fund shall be valued
at par, actual cost to the certified municipality or market value, whichever value is lower.
(P.A. 93-421, S. 12, 22.)
History: P.A. 93-421 effective July 1, 1993.